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Привет, меня зовут Миролюбов Владимир
Моя специальность — продакт-менеджмент и онлайн-бизнес. Изучаю психологию и философию. Делюсь разными идеями и мыслями на все эти темы. Больше обо мне тут.
24 March, 2015 in Blog , Blog (42)

NOTES: Online business metrics list

Hi! In this article, I try to collect all business metrics in one list. For your convenience of use, I sort them on some long read page with navigation.

Also, it is constantly updated article where, I will add new metrics, therefore, stay in touch!


ROI (Return on Investment)

One of the most important metrics for all business. For understanding this metric we need to use this:

  • Prime cost of a product (or services) – includes all costs of purchase of parts for production, delivery to a warehouse, production of goods, a salary to workers, etc.
  • The profit – profit from the sale of a product or service.
  • The sum of investments – total quantity of money which acted as an investment, for example, the budget on a contextual advertizing.

ROI know as:

ROI = (profit – prime cost) / sum of investements * 100%

ROI show you how your investments (I like to use this calculation formula for marketing and advert) worked to your business (and how you business worked too). Its simple – if ROI > 100%, your business is OK.

Practice example:

Prime Costs The sum of investments Profit ROI
 1 $ 2000 $ 500 $ 4300 460%
 2 $ 7000  $ 470  $ 7325  69,15%
  1. ROI = ($ 4300 – $ 2000) / $ 500 * 100% = 460% (good ROI)
  2. ROI = ($ 7325 – $ 7000) / $470 * 100% = 69,15% (bad ROI)

If ROI < 100% you need to think about effective of your marketing investments are something global, i mean about your product, prime coast and product price.


ALCR (Average Lead Close Rate)

This metric show you average lead close rate and using for analyze your sales funnel.

To calculate this metric you need to know next metrics:

  • L – all leads amount;
  • PL – payment orders lead.

You can calculate ALCR as:

ALCR = PL / L * 100%

Practice example:

  1. ALCR = 20 payment orders / 314 all leads * 100% = 6,3%

If this indicator is high – you have a great product and great usability on your site. If low – you need to correct some design are your offer.


CAC (customer acquisition cost)

This metrics shows the cost of one of your paid client. You can use this formula for each marketing campaign, analyze in some period of time.

CAC know as:

CAC = Summary cost for marketing and advert / new customers

Practice example:

  1. CAC = $ 500 / 12 new users = $ 41
  2. CAC = $ 2135 / 54 new users = $39

The less sum of CAC is the better for your business and for your advert.


ARPU (Average revenue per user)

This metric shows you average revenue per your one user. You need these metrics to calculate ARPU:

  • Recurring Revenue – monthly revenue from all payments
  • U – all payment users

You can simply calculate APRU as:

ARPU = RR / N

Practice example:

  1.  APRU = $ 145 000 / 500 users = $ 290

This is indistinct metric, but you need to try to raise it all time.


CR (churn rate)

Very sadness metric shows the percent of payment users, who unsubscribe or left you service are the product.

You need to use next metrics to calculate CR:

  • LU – lost users;
  • U – all users.

You can simply calculate CR as:

 CR = LU / U * 100%

Practice example:

  • CR = 15 lost users / 150 users * 100% = 10%

And, of course, you need to lower this metric as you can. Try to communicate more with the away clients and know the product problems to reduce CR (churn).


LT (average lifetime)

If you don’t have new users and current users lost your product, you can calculate average lifetime as:

LT = 1 month / CR * 100

If CR = 10% (as previous formula) we have:

  • LT = 1 / 10 * 100 = 10 mount.

As you understand, after ten months you service are product will be dead.


COGS (customer support value)

This metric shows you customer support value.

COGS = (hosting + support team salary + support soft + other support expense) / payment users

Example:

  • COGS = ($ 50 hosting + $5000 support team salary + $50 support SaaS + $ 100 ) / 200 payment users = $ 26

And, of course, you need to lower this metric as you can. But be careful – when I say lower I don’t say lower your customer service!


LTV (Life time value)

This is the very important metric in any business. It shows customer lifetime value are i like say “How much is your client life”. Its all money which your clients will pay to you in your product live.

Calculate as:

LTV = ARPU x LT – СOGS

Practice example:

  • LTV = ($ 290 average revenue per user * 5 CR) – $ 26 COGS = $ 2874

Somebody think, that LTV need to be more, than 3 x CAC and acquisition of user is well when money back in 3-6 months:

LTV = ARPU (LifeTime) > 3 × CAC

I want to correct something. LTV has indistinct value because all in this life is change. I mean markets, customers, your products and other facts.

And be careful, because I show you simple formula LTV. LTV also have a more hard formula with discount parameters and more options. May be I will tell about this in next posts.


NPS (Net Promoter Score)

Index of the customer loyalty and relationship. Calculate this score is very simple – you ask your customer only one question (by polls):

“What probability of what you will recommend a company/goods/brand to the friends/acquaintance/colleagues?”

on a 10-ball scale where 0 corresponds to the answer “I won’t recommend at all”, and 10 — “I will surely recommend”.

This score created by Frederic Rayheld in 2003 year in Harvard Business Review magazine.


And what metrics do you use? Please, add you means in the comment form.

15 March in Blog
0

Hi! In this article, I try to collect all business metrics in one list. For your convenience of use, I sort them on some long read page with navigation. Also, it is constantly updated article where, I will add new metrics, therefore, stay in touch! ROI (Return on Investment) ALCR (Average Lead Close Rate) CAC (customer […]

12 March in Blog
0

Hi! In this article, I try to collect all business metrics in one list. For your convenience of use, I sort them on some long read page with navigation. Also, it is constantly updated article where, I will add new metrics, therefore, stay in touch! ROI (Return on Investment) ALCR (Average Lead Close Rate) CAC (customer […]